The previous, simple fraud analytics technique has the following two limitations:

• It does not evaluate the importance of each vertex in the social network. A connection to a hub that is involved in fraud may have different implications than a relationship with a remote, isolated person.
• When labeling someone as a known case of fraud in an existing network, we do not consider the severity of the crime.

The watchtower fraud analytics methodology addresses these two limitations. First, let's look at a couple of concepts.